What is going on with Naked Brand (NASDAQ:NAKD) today? Many popular financial sites, like Stocktwits, showed more than a 1,000% pre-market gain this morning. At the time of writing, Google Finance is also currently showing a five-day return of more than 1,000%. Sadly for shareholders of NAKD stock, this is not the case.
A 1-for-15 reverse stock split is to blame for NAKD stock’s seemingly outlandish returns today. The reverse split became effective as of this morning, which means that for every 15 shares of NAKD stock investors owned as of yesterday’s close, they now own 1 share.
Consequently, the price of the stock increased by 15X. However, it has no effect on the market capitalization. When reverse stock splits or stock splits occur, popular financial sites sometimes have a lag in data that makes it seem like the stock increased or decreased in value by large amounts. This is an occurrence that usually confuses many investors who are not up to date on the latest news.
So, what are the reasons for a NAKD stock reverse stock split? Let’s jump right in.
What to Know About the NAKD Stock Split Today
- Naked Brands enacted a stock split to satisfy the requirements for its acquisition of Cenntro Automotive Group, a privately held electric vehicle (EV) company.
- The requirements include satisfying a minimum share price in order to acquire Cenntro and also satisfying a minimum share price in order for the Nasdaq to approve the application filed in relation with the Cenntro acquisition.
- The acquisition is expected to be completed by the end of this year and was approved by shareholders of NAKD stock yesterday. As a result of this transaction, Naked Brand will change its name to Cenntro Automotive Group. However, it will keep its existing NAKD ticker.
- The company also announced that it has sufficient capital to complete the acquisition. Therefore, it will not need to raise additional capital “in the short term.”
- According to a press release by Naked, Cenntro has “sold and delivered more Commercial Electric Vehicles than any other EV company; Customers are estimated to have traveled more than 20 million miles in 26 Countries in Cenntro EVs.”
- For 2022, Cenntro expects 21,500 vehicle sales and revenue of $506 million. For 2023, Cenntro expects to increase its revenue by more than 300% to $2.1 billion on 74,800 vehicle sales.
- Furthermore, Cenntro is expected to have $282 million in cash after the transaction closes.
- Shares of NAKD stock are down more than 17% as investors digest the reverse stock split.
On the date of publication, Eddie Pan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.